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∆ Contact Dr. Daryll E. Ray or Dr. Harwood D. Schaffer at the UTʼs Agricultural Policy Analysis Center by calling (865) 974-7407,faxing (865) 974-7298, or emailing
dray@utk.edu or
hdschaffer@utk.edu For more info, visit:
www.agpolicy.org
GIPSA Proposed Rules Have Spawned Concerns And Divergent Implications
O
n the day that we sent the last col- umn to the publisher, July 26th, the USDA’s Grain Inspection,
Packers, and Stockyards Administra- tion (GIPSA) made two announcements via a “To whom it may concern:” letter signed by Edward Avalos, Under Secre- tary for Marketing and Regulatory Pro- grams,
USDA
(
http://archive.gipsa.usda. gov/psp/avalosstatements.pdf). Ava-
los extended the comment period on GIPSA’s proposed livestock competition rule by 90 days to November 22, 2010. Secondly, Avalos released a four-page document to “clarify” what is and what is not proposed in the rule (
http://archive.gipsa.usda.gov/psp/rul efacts.pdf). In his letter he says, “it has become
apparent that there are misunder- standings” concerning the proposed rule. By way of introducing the accom- panying document, Avalos goes on to say, “This rule does not limit or prohibit marketing agreements, the use of pre- miums, or other value-added activities. The rule does not require anyone to do business with any particular person or require packers to pay all producers the same price.” The document that accompanies Ava-
los’ letter is entitled, “Farm Bill Regula- tions
– Misconceptions and
Explanations.” The format of the docu- ment is to state each of several miscon- ceptions as perceived by the USDA followed by an explanation of that mis- conception. To facilitate presentation, we convert each “misconception” into a question and then quote a key portion of the USDA’s response. Question: Would the provision on
competitive injury allow producers to sue companies without having to show competitive injury? USDA response: If a producer filed a
claim on matters dealing with practices that could cause competitive harm, such as manipulation of prices, the producer would need to show harm or the likelihood of harm to competition. If a producer filed a claim on matters that do not involve competitive harm, such as retaliatory conduct, using inaccurate scales, or providing a grower sick birds, proof of competitive injury or the likeli- hood of competitive injury would not apply. Such a requirement would be like having a car stolen, but before the police act, one would need to prove how the theft of the car impacts all of the neighbors. Question: Would the proposed rule
cause increased litigation due to the provision on competitive injury or harm? USDA response: The lack of clarity on
the issue of competitive injury currently causes litigation. The proposed rule seeks to clarify the issue and is in- tended to reduce litigation. One of the reasons the courts in recent years have ruled that proof of competitive injury or harm is necessary is because the De- partment has not articulated its posi-
tion in regulation. Question: Would the provision on
packer to packer sales eliminate mar- keting agreements or other value added activities and take away the incentive to produce meat products that consumers prefer? USDA response: The proposed rule
seeks to prevent collusion and price manipulation caused by the sharing of pricing information between packers. It does not ban packers from owning their own livestock. When a packer sells live- stock to another packer, the informa- tion signals
important market
information about price and supply lev- els. With high levels of consolidation and vertical integration, firms may be able to affect the prices of sales on the open market. There is nothing in this provision that limits or eliminates mar- keting agreements. Instead, the pro- posed rule would provide integrity in the market to prevent manipulation of prices on the open market and in mar- keting agreements. Question: Will the packer to packer
provision now require packers to sell livestock across the country to other packers willing to buy livestock? USDA response: The proposed rule prohibits only direct sales of livestock
between pack- ers. A packer could sell to in- dividuals, mar- ket agencies, dealers
or
other buyers. Qu e s t i o n :
Would Poultry Growers and Swine Produc- tion Contract Growers
be
guaranteed a return of 80 percent with their produc- tion contracts? USDA response: Under the proposed
DR. HARWOOD D. SCHAFFER
Research Assistant Professor at APAC, University of Tennessee
rule, producers are to be offered pro- duction contracts with a sufficient pe- riod of
time that provide the
opportunity to recoup up to 80 percent of the cost of their capital investment. Producers would not be guaranteed an 80 percent return on investment. This rule would not affect provisions in pro- duction contracts to deal with poor per- formers such as termination for cause. [Columnists’ note: The document quoted here says “recoup up to 80
CONTINUED ON PAGE 23
DR. DARYLL E. RAY Agricultural Economist University of Tennessee
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